Correlation Between 90331HPL1 and China Mengniu

Can any of the company-specific risk be diversified away by investing in both 90331HPL1 and China Mengniu at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining 90331HPL1 and China Mengniu into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between US BANK NATIONAL and China Mengniu Dairy, you can compare the effects of market volatilities on 90331HPL1 and China Mengniu and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in 90331HPL1 with a short position of China Mengniu. Check out your portfolio center. Please also check ongoing floating volatility patterns of 90331HPL1 and China Mengniu.

Diversification Opportunities for 90331HPL1 and China Mengniu

-0.09

Correlation Coefficient

90331HPL1  China Mengniu

Good diversification

The 3 months correlation between 90331HPL1 and China is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding US BANK NATIONAL and China Mengniu Dairy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Mengniu Dairy and 90331HPL1 is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on US BANK NATIONAL are associated (or correlated) with China Mengniu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Mengniu Dairy has no effect on the direction of 90331HPL1 i.e., 90331HPL1 and China Mengniu go up and down completely randomly.

Pair Corralation between 90331HPL1 and China Mengniu

Assuming the 90 days trading horizon US BANK NATIONAL is expected to generate 32.92 times more return on investment than China Mengniu. However, 90331HPL1 is 32.92 times more volatile than China Mengniu Dairy. It trades about 0.09 of its potential returns per unit of risk. China Mengniu Dairy is currently generating about -0.03 per unit of risk. If you would invest  9,516  in US BANK NATIONAL on September 24, 2024 and sell it today you would earn a total of  31.00  from holding US BANK NATIONAL or generate 0.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	62.98%
Values	Daily Returns

US BANK NATIONAL  vs.  China Mengniu Dairy

US BANK NATIONAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US BANK NATIONAL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 90331HPL1 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

China Mengniu Dairy

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Mengniu Dairy are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental indicators, China Mengniu showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with 90331HPL1 and China Mengniu

The main advantage of trading using opposite 90331HPL1 and China Mengniu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 90331HPL1 position performs unexpectedly, China Mengniu can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in China Mengniu will offset losses from the drop in China Mengniu's long position.

The idea behind US BANK NATIONAL and China Mengniu Dairy pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Global Correlations module to find global opportunities by holding instruments from different markets.